A section 501(c) organization that is not prohibited from participating in political campaign activity has the option of conducting the activity itself or setting up a separate segregated fund. If the section 501(c) organization conducts the activity itself, it is subject to tax, but is not required to file Form 8871. If the section 501(c) organization establishes a separate segregated fund, the fund is treated as a separate political organization and does not qualify for the exception from filing Form 8871. Therefore, unless it meets one of the other exceptions, the separate segregated fund is required to file Form 8871 to be tax-exempt.
